Is investing in condos always a bad idea?

[Josh Dane]

Is investing in condos always a bad idea? For example, I have heard of people having lots of problems in condos with 100+ units, and very high HOA fees. But what about a condo in a 12 unit building? Is this still, generally, a bad idea?
Thanks in advance!

[Michael B.]

A lot of people don't like investing in condos, but others do. I really like condos. they tend to be cheaper per sq. ft. than houses. And the rent tends to be a higher % of purchase prices than houses.

One issue that people have with condos is HOA fees, and they are frequently steep. But think about what HOA fees really are. They're primarily maintenance. House buyers pay them also, but they're called different things. They're called 'lawn maintenance'. They're called 'setting aside cash to put on a new roof someday'. They're called 'building insurance'. The economies of scale present in a condo investment reduce the cost of maintenance considerably.

The thing that I'm always interested in is how well run is the HOA. You have a partner when you invest in the condo, and that partner is the HOA. If it's well run then you have people to watch over your investment at little or no cost. If the HOA is poorly run you may have unending issues.

Before I invest in a condo complex I always try to meet at least 1 HOA board member. They're almost always retired guys that love to meet new people, and think having breakfast with an investor is a great thing. For the price of an Egg McMuffin and coffee you can usually get a lot of good information on what's going on in a HOA. It's money well spent.